A single macroeconomic factor based on growth in the capital share of aggregate income exhibits significant explanatory power for expected returns across a range of equity characteristic portfolios and non-equity asset classes, with risk price estimates that are of the same sign and similar in...

We find that shocks to the equity capital ratio of financial intermediaries—Primary Dealer counterparties of the New York Federal Reserve—possess significant explanatory power for crosssectional variation in expected returns. This is true not only for commonly studied equity and government...

Rare events (RE) and long-run risks (LRR) are complementary elements for understanding asset-pricing patterns, including the average equity premium and the volatility of equity returns. We construct a model with RE (temporary and permanent parts) and LRR (including stochastic volatility) and...

A consensus has recently emerged that variables beyond the level, slope, and curvature of the yield curve can help predict bond returns. This paper shows that the statistical tests underlying this evidence are subject to serious small-sample distortions. We propose more robust tests, including a...

We perform a comparative analysis of machine learning methods for the canonical problem of empirical asset pricing: measuring asset risk premia. We demonstrate large economic gains to investors using machine learning forecasts, in some cases doubling the performance of leading regression-based...

We show that the pattern of positive pre-announcement market drift is present not only for FOMC announcements, as documented by Lucca and Moench (2015), but also for other major macroeconomic announcements such as Nonfarm Payroll, ISM and GDP. This commonality in pre-announcement returns leads...

We develop a nonlinear state-space model that captures the joint dynamics of consumption, dividend growth, and asset returns. Our model consists of an economy containing a common predictable component for consumption and dividend growth and multiple stochastic volatility processes. The...

Gorton and Rouwenhorst (2006) examined commodity futures returns over the period July 1959 to December 2004 based on an equally-weighted index. They found that fully collateralized commodity futures had historically offered the same return and Sharpe ratio as U.S. equities, but were negatively...

We explore the term structures of claims to a variety of cash flows, namely, U.S. government bonds (claims to dollars), foreign government bonds (claims to foreign currency), inflation-adjusted bonds (claims to the price index), and equity (claims to future equity indexes or dividends). The...

Using data for more than 800 college and university endowment funds over 2003-2011, we provide a comprehensive analysis of the spending policies used in practice as well as how frequently and why those mandates are revised over time. Given the long-term and relatively static nature of the...